20th Annual Sohn

Investment Conference

Arthur Baer
May 4, 2015

www.cavendishfunds.com
Disclaimer
THESE MATERIALS SHALL NOT CONSTITUE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY INTERESTS IN
ANY FUND MANGED BY CAVENDISH FUND MANAGEMENT LLC OR ANY OF ITS AFFILIATES. SUCH AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY INTERESTS MAY ONLY BE MADE PURSUANT TO DEFINEITIVE SUBSCRIPTION
DOCUEMENTS BETWEEN A FUND AND AN INVESTOR
The information contain herein reflect the opinions and projections of Cavendish Fund Management LLC and its affiliates
(collectively Cavendish) as of the date pf publication, which is subject to change without notice at any time subsequent to
the date of issue, and severs as a limited supplement to a verbal presentation. Cavendish does not represent that any
opinion or projection will be realized. No representation or warranty is made concerning the accuracy of any data or opinion
presented. All information provided in this presentation is for informational purposes only and should not be deemed as
investment advice or a recommendation to purchase or sell any specific security. Cavendish has an economic interest in the
price movement of the securities discussed in this presentation, but Cavendishs economic interest is subject to change
without notice.
The information contained within the body of the presentation is supplemented by footnotes which identify certain of
Cavendishs sources, assumptions, estimates and calculations. This information contained herein should be reviewed in
conjunction with the footnotes.

2
Company Overview
Premier (PINC) is a healthcare services company operating two divisions:
Supply Chain Services (Group Purchasing Organization or GPO) and
Performance Services (Consulting and Software)
Total Member base of 3,400 hospitals (2,100 are part of the GPO) and CurrentCapitalization
110,000 alternate care sites SharePrice(5/1/15) $37.70
73% of Premiers revenue and 97% of cash flow comes from the Supply
Chain Services (GPO) division SharesOutstanding
GPO economic model: ClassA(mm) 37.35
Prenegotiate contracts with healthcare supply vendors ClassB(mm) 106.66
Charge the vendors a 1%3% Admin Fee on products purchased TotalShares 144.01
by Premier GPO members through these contracts
Premier then pays a portion of the Admin Fee back to its MarketCap(mm) $5,429
members in a Revenue Sharing program
GPOs are a fully evolved and competitive market: NetDebt(mm) $(440)
96% of all acute care hospitals are in at least one GPO
72% of purchases that hospitals make are made using GPO EnterpriseValue(mm) $4,989
contracts
DivisionRevenueandEBITDA
TTMDecember31,2014 AdjEBITDA
Net Adjusted Less
Division Revenue EBITDA Capex Capex
SupplyChainServices(GPO) $689,708 73.4% $374,481 $2,780 $371,701 96.5%
PerformanceServices(Consulting/Software) $250,109 26.6% $81,389 $68,007 $13,382 3.5%
TotalOperatingDivisions $939,817 100.0% $455,870 $70,787 $385,083 100.0%

Corporate $ $(81,995) $2,298 $(84,293)

Total $ $373,875 $73,085 $300,790

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PINC Short Thesis
Premiers accounting obfuscates the economic reality of its business by publishing misleading
financial statements that omit significant expenses required for ongoing operations

The omitted expenses are related to a change in economics and corporate structure with
Premiers members that took place at the time of the companys IPO in Sept 2013

These expenses, in the form of consideration paid to its own customers, represent 35% to 77%
of the earnings power of the business (depending on methodology used) and are not reflected
in the income statement

Premier also has an undisclosed open and ongoing investigation with the Office of Inspector
General (Health and Human Services) that was identified through a Freedom of Information
Request and there is an undisclosed arrangement with a paid advisor to the Board

Premier trades at a premium to its closest peer which based on the structural/regulatory risks
and actual earnings power, it does not deserve

After deducting the actual expenses needed for ongoing operations, there is significant
downside and Premier is fairly valued at $14.50 / share, 62% lower than the current market
price

4
Pre-IPO Corporate Structure
A Simple Structure, with no Outside Stakeholders
Premier was a partnership owned by its PreIPOStructure
members
OwnerMembers did not receive any Owner NonOwner
Members
Members
revenue share of the Admin Fees, but split
the profits of the company based on their
purchasing volume
100%Profitsand MarketRate
NonOwner Members received a market VotingInterest.
NoRevenueShare.
RevenueShares.
NoVoting, No
rate Revenue Share of the Admin Fees Profit

which averaged 66%

All profits were distributed to the Owner
Members and there would have been no
Premier LP
profits available for public shareholders
77% of gross Admin Fees came from CertainSubsidiaries andHoldingCompaniesNotPicturedForSimplicityofPresentation

OwnerMembers and 23% of gross Admin

Fees came from NonOwner Members GrossAdminFeeBreakdown
FY2013(Ending6/30/13) Gross
AdminFees
OwnerMembers $471,045 76.6%
NonOwnerMembers* $143,510 23.4%
Totalgrossadministrativefees $614,555 100.0%

*AdjustedforInnovatixpassthroughfeesof$31,855.

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Post -IPO Corporate Structure
A Complex Structure, with Outside Stakeholders
No economic changes For NonOwner Members PostIPOStructure
OwnerMembers designate Premier as their Primary
GPO and execute longer term GPO Participation Owner PublicFloat
Agreements that can be cancelled for convenience by Members Cass AShares
Cass BShares
either party with 1 year notice

74%Voting 26%Percent
OwnerMember Key Economic Consideration: Ownership(No Economic and
30% revenue share of Admin Fees related to that Economics) VotingOwnership.

OwnerMember
Tax Distributions that are paid quarterly to cover
Premier Inc.
prorata share of partnership income (whether or not
they are taxpayers)
Class B shares that vest annually over 7 years and can 74%Economic 26%Economic
Interest Interest
be exchanged for Class A shares issued to the public

Termination:
If either party cancels the GPO Participation Agreement,
the OwnerMember stops receiving the Revenue Share Premier LP
and the Tax Distribution
Unvested Class B shares can be repurchased by Premier CertainSubsidiaries andHoldingCompaniesNotPicturedForSimplicityofPresentation

at a below market price

Three limited partners have had their unvested
Class B shares repurchased since the IPO for
$2.35 / share

6
Accounting
Under the New PostIPO Premier Substituted the Tax Distributions and the Class B
Equity Consideration for a Significantly Below Market Revenue Share and Neither are
Included as Operating Expenses
30% Revenue Share of Admin Fees treated as a reduction in revenue (GAAP compliant)
Tax Distributions currently accounted for as an adjustment to Redeemable Limited Partners Capital on
the balance sheet and a financing transaction on cash flow statement
Class B Shares currently accounted for as an adjustment to Redeemable Limited Partners Capital on the
balance sheet and as the net change (from period to period) in market value in a line item called
Adjustment of redeemable limited partners' capital to redemption amount below net income
The labeling itself is misleading because it has nothing to do with the redemption amount of
unvested share (as seen earlier in the actual redemptions)

RedeemableLimitedPartnersCapitalAccountRollForward(BalanceSheetAccount)

ReceivablesFrom RedeemableLimited AccumulatedOther TotalRedeemable

LimitedPartners Partners' Capital Comprehensive (Loss) Income Limited Partners' Capital
June 30, 2014 $(18,139) $3,262,666 147 $3,244,674
Distributions applied to receivables from limited partners $1,635 $1,635
Repurchase of redeemable limited partnership interest $(1,515) $(1,515)
Net income attributable to Premier LP $54,816 $54,816
Distributions to limited partners $(22,691) $(22,691)
Net unrealized gain on marketable securities $(62) $(62)
Adjustment to redemption amount $382,657 $382,657
30-Sep-14 $(16,504) $3,675,933 $85 $3,659,514

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Accounting for Consideration to Customers
Providing Consideration (Including Equity) to Customers is Not Unique, in Fact FASB has
Very Clear Guidance Relating To These Issues
Cash payments should be a reduction in revenue and Equity should be an expense, both in the periods
earned by the customer
TaxDistribution
Howshoulditbeaccounted?Asa ReductioninRevenue Howshoulditbeaccounted?AsanExpense
EITF ABSTRACTS Issue No. 019: Accounting for
Consideration Given by a Vendor to a Customer
The Task Force reached a consensus that cash
consideration (including a sales incentive) given by a
vendor to a customer is presumed to be a reduction of the
selling prices of the vendors products or services and,
therefore, should be characterized as a reduction of
revenue when recognized in the vendors income
statement.
When should it be expensed? As Earned
The Task Force reached a consensus that the vendor
should recognize the rebate or refund obligation as a
reduction of revenue based on a systematic and rational
allocation of the cost of honoring rebates or refunds earned
and claimed to each of the underlying revenue transactions
that result in progress by the customer toward earning the
rebate or refund.
EquityConsideration
EITF ABSTRACTS Issue No. 019: Accounting for Consideration
Given by a Vendor to a Customer
(emphasis added). If the consideration consists of
anything other than cash (including credits that the
customer can apply against trade amounts owed to the vendor)
or equity instruments .. the Task Force reached a consensus
that the cost of the consideration should be characterized as an
expense.
When should it be expensed? When Vested
EITF ABSTRACTS Issue No. 9618 : Accounting for Equity
Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services.
Equity issuances must be accounted for at the earlier of (i) the
date at which a commitment performance by the counterparty
to earn the equity instruments is reached or (ii) the date at
which the counterpartys performance is complete.
What Value Should We Use? Fair Value
should be measured at the fair value of the consideration
received or the fair value of the equity instruments issued,
whichever is more reliably measurable.
8
True Business Economics
TwoMethodstoEvaluatetheActualEconomicsofthisBusiness

Option#1 Option#2

Adjustthecompanys Valuetheconsideration
earningstoaccountfora providedtotheOwner
marketrateRevenue Membersthattheyarenow
Shareinsteadofthe acceptingandexpensethat
arbitrary30% amount

1)TaxDistributions
2)EquityConsideration

9
Option #1: Normalized Revenue Share Rates
30% Revenue Share Paid to OwnerMembers is Not a Market Rate
HistoricalRevenueShare PremiersLargestCustomer
Premier has historically paid NonOwners GNYHA, the largest customer representing 8.4% of net
substantially higher Revenue Share percentages revenue, was paid a 75.3% Revenue Share (before
averaging 66.4% in total. converting to an OwnerMember)
2013 Implied
(FYEnding6/30/13) Rev Adj Excluding
Share GNYHA GNYHA
Implied Revenue Net Revenue
NonOwnerMembersGrossAdmin $143,480 $(49,000) $94,480 GNYHA GrossAdmin Share Admin Share
NonOwnerMembersRevenueShare* $(95,306) $36,900 $(58,406) NonOwnerMember $49.00 $36.90 $12.10 75.3%
NetAdminFees $48,174 $(12,100) $36,074 OwnerMember $35.30 $ $35.30 0.0%
$84.30 $36.90 $47.40
RevenueShare:NonOwnerMembers 66.4% 61.8%
NonOwnerMemberfromJul'12Dec'12andOwnerMember
*AdjustedforInnovatixpassthroughfeesof$31,855. fromJan'13June'13.

Competitor
MedAssets currently pays a 41.1% Revenue Share our forecasted 100 to 200 basis points increase in
and forecasts a 100200 bp increase in 2015 (with revenue share obligation rate due to renewal pricing in
annual increases every year) a competitive market environment, consistent with
MedAssetsRevenueShare previous yearoveryear increases.
2014 2013 2012
..if you look back at the annual results for the
GrossAdminFees $494,927 $472,113 $427,698
RevenueShare $203,564 $182,638 $160,783 company, you'll see yearoveryear increases in
RevenueShare% 41.1% 38.7% 37.6% revenue share obligation pretty much throughout and
certainly the rate this year is indicative of some prior
AnnualIncrease 6.32% 2.91% 7.12%
years slightly different but not dramatically different.
FiveYearTotalIncrease 21.72% 14.49% 11.25%

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Option #1: Normalized Revenue Share Economics
An Adjustment in Revenue Share Percentages has a Huge Impact
NetAdminFeeshavenodirectcosts a$1reductioninnetAdminFees,willequateto$1reductionin
operatingincome
Premierisoverstatingoperatingincomeby$195millionusingtheirownhistoricalRevenueSharePercentages
or$129millionusingamoreconservative54%(averageofMedAssetsactualandPremierhistorical)

NormalizedRevenueShareAdjustment
54.0% 66.40%
Current RevShare RevShare
LTM LTM LTM
OwnerMembers(Estimated) $536,732 $536,732 $536,732
NonOwnerMembers(Estimated) $163,917 $163,917 $163,917
GrossAdminFees(Estimated) $700,649 $700,649 $700,649

RevenueSharePercentage 30.00% 54.00% 66.40%

RevenueShareOwnerMembers $161,020 $289,836 $356,390

RevenueSharePercentage* 61.80% 61.80% 61.80%

RevenueShareNonOwnerMembers $101,301 $101,301 $101,301

NetAdministrativeFees $ 438,329 $ 309,513 $ 242,958

ChangeFromCurrent N/A $(128,816) $(195,371)

%ImpacttoLTMEBITDA N/A 34.45% 52.26%

%ImpacttoLTMEBITDALessCapex N/A 42.83% 64.95%

*Disclosedrevenueshare,afterbackingoutlargestmembernowincludedasanOwner.

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Option #2: Valuing Consideration to Customers
Other Consideration Paid to Owner Members is Significant and is Only Paid so Long as
the OwnerMembers Maintain Premier as their Primary GPO

TaxDistributions ClassBUnvestedShares
Tax Distributions paid to OwnerMembers have PotentialClassBShares(mm) 112.61
been $91 million in the last year. They have been YearsVesting 7.00
recorded as a financing transaction on the cash flow ClassBSharesPerYear(mm) 16.09
statement.
CYQ4 CYQ3 CYQ2 CYQ1

"Tax"Distrubution
LTMActual 12/31/2014 9/30/2014 6/30/2014 3/31/2014
$91.20 $23.75 $22.69 $22.41 $22.35
RedemptionPrice $2.35
FairValue $14.50
OwnerMembers are generally, nonprofit and do
not pay taxes. Difference $12.15

Revenue Reduction Per Year of $91 million OperatingExpensePerYear(mm) $195

TaxDistributionandEquityshouldbechargedasanoperatingexpenseontheincomestatement

Thisequityconsiderationshouldnotbebackedoutinaproformaascustomerswouldnotpurchase
productsthroughPremierunlesspaidthisadditionalconsideration

Intotal,Premierisoverstatingoperatingincomeby$286million(TaxDistributionsandEquity)

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Regulatory Concerns
Open and Ongoing Investigation by Office of Inspector General Undisclosed by Premier
AntiKickbackStatute
AntiKickback statute prohibits remuneration in return for
recommending products or services that are covered by
Medicare/Medicaid

Certain specific exemptions to the statute that Premier relies to

collect providing equity interests is not one of those
exemptions. Admin Fees and remit Revenue Share to its
members
Prior to the IPO, the OIG at the HHS published an Advisory
Opinion (at the request of a competitor) which indicated that a
similar reorganization could potentially be prohibited under the
AntiKickback Statute
Premier maintained their restructuring was different, did not
seek (nor receive) approval from the OIG and went ahead with
their IPO

Premier disclosed in the 10k for the FY ending 6/30/14, they had
responded to an informal request from the OIG
FOIL Request (dated April 10, 2015):
(1) A copy of any formal or informal inquires, investigations or requests sent to
Premier Inc., Premier Services, LLC, or Premier Healthcare Alliance, L.P. (or
related entities) related to any investigation through the OIG related to (i)
AntiKickback Statute or (ii) the equity ownership structure of those listed
companies;
(3) Any written communication between the HHS Office of Inspector General and
Premier, Inc., Premier Services, LLC, or Premier Healthcare Alliance, L.P.
regarding OIG Advisory Opinion No. 1309 (whether letters to HHS from
Premier or from HHS to Premier)
This office has been informed that there is an open
and ongoing investigation concerning items 1 and 3
items of your request. Therefore, I am denying the
requested records under FOIA Exemption (b)(7)(A)...
Exemption (b)(7)(A) permits the withholding of
investigatory records compiled for law enforcement
purposes when disclosure could reasonably be
expected to interfere with enforcement proceedings.

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Undisclosed Arrangement
What Exactly is Premiers Relationship With GNYHA?
UndisclosedArrangement
GNYHANonProfitTaxReturndisclosesanequitybasedprofits
interestprovidedtoLeePerlmanfromtheGNYHAHoldingsLLC
(theMangerforthebeneficialownerofGNYHAsPremiershares)
LeePerlmanisaformerBoardmemberofPremierandcurrentlya
paidadvisortotheboard
HeevenintroducedthecompanyatthefirstInvestorDay,witha Page26
picturetweetedoutbyPremier

.. Lee Perlman participated in and received

1. Whywasntthisequityrelatedinterestdisclosedandwhat
exactlyisMr.Perlmansarrangement?
2. CanaGNYHAprincipalacceptprofitsinterestrelatedtoPremier
equitywithintheAntiKickbackstatuesinceheisacustomer?
payments from an equitybased compensation
arrangement sponsored by GNYHA Holdings
LLC.certain equitybased interests subject to
vestingthe distribution payments from the equity
based compensation arrangement for tax year 2013 are
as follows.Lee Perlman $1,804,503.

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Valuation
Withtheregulatoryriskofanundisclosedinvestigationandrelatedpartydealings,Premiershouldtrade
atamultiplelowerthanpeers,howeverthisvaluationassumesa10.0xEV/EBITDAmultiple
MedAssets,Premiersclosestcompetitor,tradesat8.9xEV/EBITDA
Adjustingthemischaracterizedfinancials:
Option#1:RevenueShareadjustment,resultsinanormalizedEBITDAof$245millionandan
EnterpriseValueof$2.45billion($20pershare)
Assumes54%conservativemidpointRevenueShare
Option#2:AccountingAdjustmentsforTaxDistributionsandEquityConsiderationresultsina
normalizedEBITDAof$87millionandanEnterpriseValueof$870million($9pershare)
Myfairvalueis$14.50,themidpoint,whichis62%lowerthanthecurrentmarketprice

ValuationFramework
Option#1 Option#2
Normalized GAAP
RevenueShare Adjusted Average
ReportedEBITDA $373,875 $373,875 $373,875
EBITDAAdjustments $(128,816) $(286,617) $(207,716)
NormalizedEBITDA $245,059 $87,258 $166,159
PercentofEBITDAOverstatement 34.5% 76.7% 55.6%

EBITDAMultiple 10.00x 10.00x 10.00x

EnterpriseValue $2,450,592 $872,579 $1,661,586

Less:Debt $(34,581) $(34,581) $(34,581)

Add:Cash $474,540 $474,540 $474,540
TotalEquityValue $2,890,551 $1,312,538 $2,101,545

PerShareFairValue $20.07 $9.11 $14.59

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Appendix
Planned Equity Offering
Get Ready For The Shares
TheOwnerMembersareeligibletosellupto27.3millionshares(73%ofthecurrent
ClassAfloat)byNovember2015.Anunderwrittenofferingisalreadyplanned
OwnerMembers owned 112 million Class B shares that PotentialSharesForSale
are convertible to Class A shares in equal annual ClassAOutstanding(2/5/2015) 37.35
installments for 7 years as they vest (16 million shares
per year) ClassBShares(atIPO) 111.9
Premier agreed to conduct an underwritten secondary
EligibleForExchange/SaleEachYear(mm) 16.0
offering each year for three years ExchangedYear1(mm) 4.7
The OwnerMembers can also exchange vested shares BacklogFromYear1(mm) 11.3
on a quarterly basis and sell pursuant to rule 144
Year2Eligible(mm) 16.0
restrictions
The first underwritten secondary offering was TotalEligibleSharesNov'15(mm) 27.3
conducted in November 2014 and the others will be PercentofCurrentClassAFloat 73.0%
completed in November 2015 and November 2016
RemainingFutureSharesThereafter(mm) 79.9
In the first exchange (one year after the IPO), 4.7 million
shares of Class B common stock was exchanged
The backlog of 11.3 million shares from the first
year can be exchanged anytime on a quarterly
basis

16